The Tesla (NASDAQ:TSLA) share price is volatile. Most investors who have been monitoring the stock market for a period of time will know this. Yet the 26% fall over the past month is a large drawdown by anyone’s expectations. Understanding the reasons behind the move can help people to make informed decisions and avoid overreacting when it comes to Tesla stock.
Key factors to note
I put the move over the past month down to three main reasons. To begin with, underwhelming financial performance. The Q4 (and 2024 annual) results that came out at the end of January missed market expectations. Total automotive revenue fell by 8% in 2024 versus the previous year. Net income dropped by 53%, with free cash flow decreasing by 18%.
A second factor is the concern about Elon Musk’s political involvement. Some investors are getting a bit concerned about the extent of his support for Germany’s far-right AfD party, as well as the time being taken up with his role in President Trump’s administration. It’s true that any political affiliation will impact the brand image, and it appears that actions over the past month haven’t helped.
Finally, chatter about slower EV demand in Europe has hampered the share price. In January, Tesla’s vehicle registrations in Europe fell by 45% compared to the same period in 2024. This is a chunky fall, and comes at a time where not only is EV demand stalling but competition is increasing. It’s a tricky cocktail to navigate for the business.
Looking ahead
The past can’t be changed. What’s important is assessing whether these factors could continue for the rest of the year or not. Musk’s affiliations and support will always be a risk for the stock, but I don’t see it as something that will seriously spook investors further.
The financial performance and outlook for Europe is concerning. However, the results did show some positives. For example, Q4 was a record quarter for both vehicle deliveries and energy storage deployments. Once all the data is in, Tesla expects the Model Y to “once again be the best-selling vehicle, of any kind, globally for the full year 2024”.
Let’s not forget about key initiatives that are expected to go live this year, including the robotaxis in the US. As the business continues to expand into other areas beyond traditional vehicles, new revenue streams open up. This could provide shareholders with more optimism as the year goes on, causing the stock slump to ease.
The bigger picture
Over the past year, the stock is up 49%. So although the move lower in the past month isn’t excellent, it’s not the end of the world. I don’t think investors should panic right now. Those who don’t own the stock might even consider this a dip to buy.
